UTC to get a new 14-story high-rise

Irvine Co. starts a speculative office building at UTC, the company's first local high-rise

La Jolla Centre III, rendered in the center of this aerial view, will include a five-level, 1,215-space parking garage immediately south. The elliptical buildings are La Jolla Centre I and II, opened in the 1980s by the Oliver McMillan development firm. The empty lot behind La Jolla Centre III is the site of the LPL Financial Building by Hines, now nearing completion.
— -- Irvine Co.

La Jolla Centre III, rendered in the center of this aerial view, will include a five-level, 1,215-space parking garage immediately south. The elliptical buildings are La Jolla Centre I and II, opened in the 1980s by the Oliver McMillan development firm. The empty lot behind La Jolla Centre III is the site of the LPL Financial Building by Hines, now nearing completion.
/ -- Irvine Co.

The Irvine Co. announced Tuesday its first high-rise construction project in San Diego.

Grading has begun on a 14-story, 306,000-square-foot speculative office tower in the University Towne Centre area.

Estimated at about $92 million, La Jolla Centre III, designed by New York’s Pei Cobb Freed & Partners, is expected to open in 2015 and include more than 1,200 parking spaces. The building in La Jolla Centre will be located at the southwest corner of Judicial and Executive drives.

"The UTC market hasn't been this strong in years, and it's the right time to do it," said John Turner, Irvine's San Diego regional vice president.

It will be the first high-rise Irvine has built in San Diego since expanding from its Orange County base 30 years ago. Irvine previously focused on building low- and mid-rise office campuses.

It also will be that rare multi-tenant office project to go forward without preleasing by prospective tenants. Developers typically collect commitments of 50 percent or more of the space before locking in construction loans.

"We're not in a situation where we need to provide preleasing to get financing," Turner said. "It's something that's not necessary for us to do."

In recent years, Irvine, which typically finances its own construction and acquisitions, has scooped up numerous trophy office properties at less than replacement cost. Its last new-construction in San Diego, completed in 2007, was Eastgate, a 22-building campus at Towne Centre Drive and Eastgate Mall north of La Jolla Centre.

The company acquired elliptically shaped La Jolla Centre I and II, totaling about 300,000 square feet in 2007. They were part of a 21-building package, estimated at $1 billion, that had transferred ownership from Equity Office Properties to the Blackstone Group. Oliver McMillan was the original developer in the 1980s.

Pei Cobb Freed, founded in 1955 by I.M. Pei and Henry Cobb, is best known for its glass pyramid at the Louvre in Paris, and in California, for the San Francisco Main Library. Its office buildings tend to be modernist glass-and-steel structures without the decorative elements and historic allusions that showed up on many post-modern structures in the last 30 years.

Pei Cobb also is known for the Holocaust Museum in Washington, D.C.; Rock and Roll Hall of Fame and Museum in Cleveland; Jacob Javits Convention Center in New York City; and John Hancock Tower and John F. Kennedy Library in Boston. La Jolla Centre III will be the firm's first San Diego project.

For Irvine, the firm also has designed a highrise west of the Santa Fe Depot in downtown San Diego, but Turner said construction is not contemplated for the "mid-foreseeable future."

La Jolla Centre III will include a food service space, fitness center and outdoor WiFi-serviced work space.

"It's going to be a beautifully landscaped area," Turner said, designed for working and meeting.

The garage will include 1,215 spaces in five levels immediately south, producing an overall parking ratio of five spaces per 1,000 square feet , when the industry norm is usually three or four per thousand.

Irvine did not disclose the project cost, but Eric Northbrook, executive director of the Cushman & Wakefield brokerage, placed it at about $91.8 million for the office building and parking.

"It's really hard to compete against the Irvine Co.," said Northbrook, whose company represents the Hines development firm in a neighboring project, La Jolla Commons, where the LPL Financial Building is nearing completion.

Northbrook said while the Irvine building's start is significant, it does not signify the start of a new office-building boom. Several other developers, including Hines, are contemplating major construction starts but have made no commitments so far.

"This market is walking -- it's not running," Northbrook said. "We still haven't seen the velocity in the marketplace, in my opinion, to feel real comfortable. If it wasn't Irvine, I don't think that property would be built right now."

What's keeping the market from the boom times is the overall economy -- growing but not soaring. Office rents still have not recovered from their highs, although the bargains of a few years ago that allowed tenants to move from so-called Class B to Class A locations have vanished.

For the largest submarkets, the current vacancy rates for Class A office buildings, those that are typically the newest and best located, are: